Revenue per employee (also called sales per employee) is a financial ratio that measures the revenue generated by each employee of the company on average. It equals the company's total revenue divided by the average number of employees for the period.
What is the meaning of re revenue per employee?
Revenue Per Employee. What is Revenue Per Employee? Revenue per employee is an efficiency ratio used to determine the revenue generated per individual working at a certain company. The revenue per employee ratio is important for determining the efficiency and productivity of an average employee in a company.
What is revenues per employee ratio?
Revenue per employee also suggests that a company is using its resources—in this case, its investment in human capital—wisely by developing workers who are very productive. Companies with high revenue-per-employee ratios are often profitable. Some analysts use a variation of the revenue per employee ratio.
What is the formula for revenue per employee?
Revenue Per Employee Formula Revenue per employee is an essential financial ratio calculated by dividing revenues generated for a specific period by the number of employees in a company. It helps as a measure of average financial productivity for each employee of the company.
What does a high revenue per employee mean?
In general, relatively high revenue per employee is a positive sign that suggests the company is finding ways to squeeze more sales ( revenue) out of each of its workers. Labor needs vary from industry to industry, and labor-intensive companies will typically have lower revenue per employee ratios than companies that require less labor.
What is the meaning of revenue per employee?
Revenue per employee is a ratio that measures the total revenue of an organization divided by its current number of employees. It provides a rough estimate of how much money is generated per employee at an organization. It's a helpful metric to use when: Comparing revenue per employee year-on-year.
What is sales revenue per employee?
Key Takeaways. The sales-per-employee ratio is annual sales divided by total employees. This metric is beneficial when assessing businesses that rely heavily on employees, such as retailers and banks. A higher sales-per-employee number is better.
How do you calculate revenue per person?
Revenue per person (RPP) is a pretty simple number to calculate. It's the total revenue or sales a company makes divided by the full- time people working there. If your business makes $10 million in sales and has 100 full-time or equivalent people, you have $100k revenue per person.
Is revenue per employee a good metric?
In conclusion, revenue per employee is an important metric to measure that allows you to compare your small business and others operating in the same industry to understand better how your staff efficiencies affect your overall financial performance.
Which company has highest revenue per employee?
The company that has the most profits per employee is Air Lease. The company reported $516 million in profits, or $4.3 million per employee. Air Lease, with an employee count of 120, buys passenger planes and leases them to airlines.
What is a good salary to revenue ratio?
between 15 to 30 percentGenerally, payroll expenses that fall between 15 to 30 percent of gross revenue is the safe zone for most types of businesses.
What does revenue per customer mean?
Average revenue per user measures the amount of money that a company can expect to generate from an individual customer. It's calculated by dividing the total revenue of the business by its total number of users.
What is revenue vs profit?
Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. Profit, which is typically called net profit or the bottom line, is the amount of income that remains after accounting for all expenses, debts, additional income streams, and operating costs.
What is remuneration in accounting?
Remuneration Remuneration is any type of compensation or payment that an individual or employee receives as payment for their services or the work that they do for an organization or company.
Why do companies want a high RPE?
Therefore, companies typically want a high RPE to offset the expenses paid to employees. Generally, a higher RPE typically indicates a more productive and efficient company. The revenue per employee ratio is particularly useful for analyzing companies that operate in service industries. to analyze a given firm.
Is net income a line item?
Net Income Net Income is a key line item, not only in the income statement, but in all three core financial statements. While it is arrived at through. in the numerator, as opposed to revenue.
What is revenue per employee?
Revenue per employee is an important metric used to define the revenue generated by each individual working at a company. It is used as an efficiency ratio helping to estimate the productivity of the average employee.
How to calculate revenue per employee?
Revenue per employee is calculated as total company’s revenue divided by the current number of employees, roughly measuring how much money each specialist working at a particular company brings to the firm.
What is revenue per employee?
Revenue Per Employee is the ratio of revenue generated per employee of a company on an average; this ratio gives an idea about how the company will perform in a specific quarter – especially considering the revenue vs cost of each employee of the company.
What does it mean when a company has a higher revenue per employee?
If a company has higher revenue per employee formula, it means that the company is generally doing well and trying to make optimum utilization of available manpower in the form of its employees. However, labor-intensive companies.
What is employee asset utilization?
Employee represents a unique asset to a business, and if the concept of asset utilization is applied carefully in nurturing employees with a high level of productivity, a company can potentially perform much better than its peers.
How much does Fiat make per employee?
Fiat, on the other hand, makes around $538,122 per employee. In general, the top tech company’s revenue per employee is more than the manufacturing companies revenue per employee.
What is Revenue per Employee?
Revenue per Employee is a measure of the total Revenue for the last twelve months (LTM) divided by the current number of Full-Time Equivalent employees. Also known as Revenue to Employee Ratio, this ratio is among the most universally applicable and is often used to compare companies within the same industry.
More about Revenue per Employee
As an internal KPI, the Revenue to Employee ratio is often used alongside Profit per Employee and Expenses per Employee. Monitoring these metrics over time is a good way to track growth or decline in overall efficiency.
Revenue per Employee by Industry
Revenue per Employee Ratio varies by industry. The Energy sector has the largest revenue per employee by far, followed by Healthcare and Utilities, all with more than $800,000 revenue per employee. Software and technology companies have an average revenue to employee ratio of around $400K.
Revenue per Employee Frequently Asked Questions
You might be in an industry that requires a high number of employees in proportion to your revenue. If your revenue per employee is low when compared industry benchmarks, it may indicate you need to revise your hiring practices. Conversely, high revenue per employee could indicate overworked employees.
What is revenue per employee ratio?
What is the Revenue Per Employee Ratio? The term “Revenue per Employee (RPE) Ratio” refers to the financial metric that measures the dollar amount generated by each employee of a company . In other words, this metric assesses how well a company is able to leverage its manpower in order to make more revenue. It is usually more useful ...
Why do companies prefer higher RPE?
Companies always prefer a higher value of the RPE ratio because it indicates that the subject company exhibits greater productivity.
What are the advantages of a company?
Some of the major advantages are: It helps in assessing the operational efficiency of a company and plan for further improvement. It aids in deciding the employees’ salary and wages such that each employee positively contributes to the company’s profit.
Is revenue per employee a performance indicator?
So, it can be concluded that the performance metric or key performance indicator – revenue per employee ratio, is a very useful measure of efficiency that guides the management to either hire or lay-off employees. However, there are a few limitations that need to be addressed in order to draw the full benefits of the ratio.
How much does Ferrari make per employee?
Ferrari has a revenue per employee of $1,377,500. (Source: Owler) Founded by the famous Enzo Ferrari, Ferrari is an Italy-based designer, manufacturer, and retailer of sports cars. The Prancing Horse has an annual revenue of $4.2 billion, with 3,049 employees.
What is Apple's business?
Apple is one of the leading companies in the tech industry; it engages in the design, manufacturing, and marketing of mobile communication and media devices, personal computers, as well as portable digital music players.
How much revenue did Exxon Mobil generate in 2018?
A Paris-based company, it is one of the largest companies worldwide based on revenue. In 2018, the company generated some $209.3 billion in revenue, with 102,168 employees. As to the other companies, Exxon Mobil is one of Total’s biggest competitors, generating 34% more than Total in revenue.
How to calculate revenue?
For a company that makes its money from sales, you can calculate revenue by multiplying the number of units sold by the average price of each unit.
What are the different types of revenue?
Many different types of revenue have been defined, including: 1 Sales revenue: When a company makes its money from the sales of products and services. 2 Recurring revenue: Companies that get money regularly via subscriptions have recurring revenue. 3 Interest revenue: Some companies get a lot of their revenue from interest on loans, such as banks. 4 Tax revenue: The government gets most of its income from taxes. 5 Non-profits: Non-profits get money in different ways, such as donations or membership fees. Their revenue is often termed gross receipts. 6 Operating revenue: This is money earned from a company's regular business activities. 7 Non-operating revenue: This money is seen as a one-time thing, such as a payment from a lawsuit.
What are the two financial numbers most closely followed by stock analysts and investors?
The two financial numbers most closely followed by stock analysts and investors are revenue and EPS (earnings per share). When a company releases its financials for each quarter, the financial media report whether revenue and EPS are above or below expectations.
Why is revenue referred to as the bottom line?
Revenue is often referred to as the “top-line” because it is the first number listed on the income statement of the financial report. Net income, or profits, is referred to as the “bottom-line” because it’s closer to the bottom after you have subtracted all expenses. Here’s a screenshot of Facebook’s ...
What is the difference between growth and value investing?
Investing in stocks with strong revenue growth is often termed growth investing, while value investing tends to favor cheaper stocks with more stable financials.
Why is revenue growth important?
When revenue is growing year-over-year, it implies that the company is expanding by gaining market share or improving its operations. Companies that have consistent revenue growth tend to have much higher stock prices.
What is the difference between sales revenue and recurring revenue?
Sales revenue: When a company makes its money from the sales of products and services. Recurring revenue: Companies that get money regularly via subscriptions have recurring revenue. Interest revenue: Some companies get a lot of their revenue from interest on loans, such as banks. Tax revenue: The government gets most of its income from taxes.
Formula For Revenue Per Employee
- The formula for the ratio is as follows: Note: A variation to the formula above often used by analysts is to use net incomein the numerator, as opposed to revenue.
Examples
- Example 1: Facebook Inc.
John is an equity analyst conducting analysis on Facebook Inc. John’s manager asks him to analyze the productivity of an average employee at Facebook and instructs him to determine the revenue per employee for Facebook as of December 31, 2018. Scanning through Facebook’s an… - Example 2: Hypothetical Competitor Analysis
Given only the revenue and number of employees of different companies operating in the same industry, use the revenue per employee ratio to find which company is more productive: From the table above, and with only revenue and employee figures available, we conclude that Company …
Importance of Revenue Per Employee
- For many companies, their largest expenses are salaries and benefits for employees. In addition, the workforce is what drives business success. Therefore, companies typically want a high RPE to offset the expenses paid to employees. Generally, a higher RPE typically indicates a more productive and efficient company. The revenue per employee ratio i...
Related Readings
- CFI offers theFinancial Modeling & Valuation Analyst (FMVA)™certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful: 1. Average Revenue Per User (ARPU) 2. Customer Acquisition Cost (CAC) 3. Profitability Ratios 4. Revenue vs Income